Tuesday, December 30, 2008

10 Predictions for the Internet for 2009

As 2008 draws to a close, many bloggers are offering a list of predictions for the coming year. This is always a great opportunity for a writer to risk making a fool of himself. Not being one to avoid appearing foolish, I offer my predictions for what developments will occur on the Internet next year.

More blogs! As the unemployment rate increases, expect a good number of jobless folks to begin writing blogs to rip on their former employers, to discuss their job search or to try to make money.

Google will continue to dominate (no surprise here but it's worth mentioning). Their search share will continue to increase though slowly. Search ads will hold their own but a tight-fisted consumer will be clicking less. AdSense will grow due to the increase in number of blogs (see item #1). Nevertheless, look for Google revenue to stagnate in the first half of 2009 as bids for search terms decrease, marketing budgets decline and unemployed users click on ads more infrequently.

Linked-In will soar as waves of unemployed try to bolster their personal networks. My expectation is that Linked-In will be bought by Microsoft (would have been a good acquisition for Yahoo! if Yahoo! wasn't so distracted trying to solve its own problems).

Amazon will take its place beside Google as one of the two technology leaders on the Internet. The company just announced it had its best holiday shopping season ever as most other retailers turned in dismal performances. The company's cloud computing initiatives are actually leading Google's. Where I have always considered Amazon more of a retailing play, the company is proving it deserves to be considered a bellwether by tech investors, as well.

Facebook will surpass MySpace in unique traffic and begin to pull away. If MySpace doesn't provide more applications like games and various kinds of communications widgets, they will be surpassed by Facebook which is capitalizing and benefiting from their developer program. Facebook is capturing ever younger users who now use the site as their primary platform on the web. The add-ons, extras and applications concocted by the thousands of developers working on the Facebook platform are a huge advantage for the site as they have the potential to keep the site continually fresh. This could help keep those younger users coming back for a long time.

E*Trade will be acquired. A leading candidate has been Goldman Sachs. What about Amazon? With a market cap barely above $600 million, E*Trade is certainly affordable. Now that Amazon has become the category killer in online retailing it wouldn't be a stretch to see the company set its sights on the online banking and brokerage sector.

Advertisers will push publishers to accept CPA versus CPC. CPA or cost-per-action advertising results in publishers getting paid only if a users clicks through to an advertiser's site and actually takes an action like subscribing or purchasing. CPA or cost-per-click is when publishers are paid when a user merely clicks on an ad. Advertisers will push the CPA approach because it will be cheaper for them and will also tend to reward the publishers that provide the best traffic. Small publishers will hate it and it could impact Google's AdSense and search ad business which is mostly CPC.

With location awareness becoming ubiquitous, anonymity on the web will be degraded. Some online crazy or stalker will use this functionality to do something bad. There will be a backlash and resurgence of privacy that will impact social networking sites.

Monetization of certain popular sites will stall. YouTube, MySpace and Facebook will make no headway on customer targeting but will benefit marginally by increased traffic.

Last but not least, what prediction list would be complete without some reference to Yahoo! and Microsoft? Yahoo! will sell its search capability to Microsoft and Google will buy what's left of Yahoo! after the Justice department decides that combining Google's ad network (based on the Doubleclick acquisition) with Yahoo's ad network doesn't violate any anti-trust rules. The cultures of Google and Yahoo! will mesh much better than those of Yahoo! and Microsoft. Yahoo! will add their web content to the Google empire and fill a hole in Google's suite of online properties. AOL will be left at the alter.

So there you have it. We'll have to check back next year and see if any of these came to pass. For now, have a happy and safe New Year. If you have any predictions you would like to share, please leave a comment!

Disclaimer: This site may include market analysis. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.

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